Trade Forex or Invest in Regular Stocks? Which is Better?

HOUSTON, TX / ACCESSWIRE / January 20, 2020 / Both forex trading and stock trading provides investors with a diversity of investment opportunities, each with its own features, perks, and risk levels. Though they both deal with buying and selling, their major difference can be drawn from the kind of commodities they trade-forex trades foreign currencies over the counter (OTC) while stock trading is focused on trading company shares on a central exchange.

What is the Forex Market?

“The forex market is the market in which participants can buy, sell, exchange, and speculate on currencies…the currency market is considered to be the largest financial market with over $5 trillion in daily transactions, which is more than the futures and equity markets combined.”

What Is The Stock Market?

“The stock market refers to the collection of markets and exchanges where regular activities of buying, selling, and issuance of shares of publicly-held companies take place.”

Trading Forex Vs Trading Stocks

There are investors/traders who trade both stocks and forex, but one of the major reasons why some traders would pick forex over stock trading is forex leverage. For a new investor or trader, it may be quite tricky knowing which one to trade in. No one is better than the other, they are both financial instruments that have the potential to fetch the investor or trader more profit if played well. Though the underlying goals and risk levels of forex and stock may be quite similar they have certain dissimilarities that set them apart. Outlined below are some of the dissimilarities.

Trading Platform: In stock trading, investors or traders require a central exchange like the New York Stock Exchange (NYSE) to trade. These central exchanges provide stock traders and investors access to order-books that have records of all stock purchases and sales. With a record of all the buying and selling, traders/investors are able to analyze similar patterns that occurred on the exchange in the past and recent times. Stock traders and investors study past buying and selling patterns for different reasons one of which is tracking the exchange activity to know the best time to buy or sell a stock. While for forex trading, currencies are traded over the counter (OTC)-meaning that there is no central exchange that regulates forex as all transactions are privately done between buyer and seller.
Trading Time: Another major difference between forex and stock trading can be seen in market trading hours. Since forex has no central exchange and it spans across different time frames, it is open 24 hours. Meaning that traders can trade currencies around the clock at all forex trading sessions. The major trading sessions are New York, London, Sydney, and Tokyo sessions. Note that the forex market is only open for trading during working days and closed for trading on weekends. On the flip side, the stock market is only open for trading on central exchanges from 8 am to 5 pm daily (the time is subject to the exchange geographical location). Once the market closes by 5 pm all pending trades can only be made when the market opens the next day by 8 am. For some traders, the stock market timing stands as a major limitation.
Trading Pattern: In forex trading, currencies always quoted in pairs (e.g. USD/GBP or EUR/USD). Each currency quoted in a pair is dependent on the other. So, a forex trader is not only concerned about the financial status in the country of the currency that is being traded but also the financial situation of the country that is being traded against. Whereas, in stock trading, the trader is only concerned with the happenings surrounding the company he owns shares in. That is, if a trader owns Apple shares, he is only concerned with financial occurrences and other occurrences that happen around Apple. Whatever happens in other companies is absolutely none of his business, unless for other interests. Forex trading pairing nature requires that the trader be consciously aware of the economic standing of both countries before trading their currencies. A downside for the forex market is that it is prone to political and economic influence, unlike the stock market which is hardly affected by any socio-political and economic issues that may arise in a country.
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